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General Electric – Don’t Stop the Gravy Train

Posted by Steve Markowitz on October 4, 2009

The Financial Times reported that General Electric has begun warning governments worldwide not to end their stimulus programs prematurely, as this action would send economies back into recession.  Should we expect GE to suggest anything else?

GEGeneral Electric is the world’s largest industrial Company.  Nani Beccalli, head of GE International, expressed concern as governments are beginning to discuss exit strategies for stimulus programs.  Beccalli said: “I am a bit concerned when I hear about exit strategies.“… “It is not the right time.”

Other large companies and private equity groups are expressing similar concerns.  However, this response is natural as they try to protect their incomes.  These large companies are the biggest beneficiaries of the government spending programs.  They will not call for an end to the gravy train.  This points to a major problem with the government stimulus programs.  These programs artificially prop up demand, which then leads to suppliers maintaining production capacity, even when real demand has decreased.  This artificial demand does not allow for the economy’s natural cleansing to occur, as required to rebalance the system when it gets out of balance.

Governments have spent trillions of dollars worldwide with stimulus programs.  It is inevitable that when these stimulus funds start getting withdrawn, there will be disruptions in the market and some will be painful.  This will occur whenever the funds are withdrawn.  There is no good time for the action.  That is why governments should not intervene in the first place.  We are already going down a slippery slope.  It will be difficult for governments to pull the plug on spending, which will continue until they are forced to do so by economic realities, probably in the form of more severe economic problems.

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One Response to “General Electric – Don’t Stop the Gravy Train”

  1. Carl Hackert said

    The excerpt below from the 9/9/2010 Washington Times article on “Green Jobs” explodes some of the green job creation myths… It turns out that many of the jobs and equipment purchases benefit other countries, most notably China. And, with Cap and Trade and a drillinng ban, expect to see even more job losses. Finally, some energy industry analysts have warned that green jobs are lateral job transfers since the energy industry will simply takes a employee from traditional energy to green energy.

    “Noticeably absent from President Obama’s latest economic-stimulus package are any further attempts to create jobs through “green” energy projects, reflecting a year in which the administration’s original, loudly trumpeted efforts proved largely unfruitful.

    The long delays typical with environmentally friendly projects – combined with reports of green stimulus funds being used to create jobs in China and other countries, rather than in the U.S. – appear to have killed the administration’s appetite for pushing green projects as an economic cure.

    After months of hype about the potential for green energy to stimulate job growth and lead the economy out of a recession, the results turned out to be disappointing, if not dismal. About $92 billion – more than 11 percent – of Mr. Obama’s original $814 billion of stimulus funds were targeted for renewable energy projects when the measure was pushed through Congress in early 2009.

    Even some of the administration’s liberal allies have expressed skepticism over the original stimulus package’s use of green investments as a way to spur quick employment growth at home.

    “Spending on renewables is slow to get out of the door. Leaks to foreign companies is an inadequate driver of jobs and growth and may not create a strong exporting industry,” said Samuel Sherraden, an economic analyst at the New America Foundation, a Washington-based progressive think tank.

    Only about $20 billion of the allotted funds have been spent – the slowest disbursement rate for any category of stimulus spending. Private analysts are skeptical of White House estimates that the green funding created 190,700 jobs.

    The Department of Energy estimated that 82,000 jobs have been created and has acknowledged that as much as 80 percent of some green programs, including $2.3 billion of manufacturing tax credits, went to foreign firms that employed workers primarily in countries including China, South Korea and Spain, rather than in the United States.

    Peter Morici, a business professor at the University of Maryland, said much of the green stimulus funding was “squandered.”

    “Large grants to build green buildings don’t generate many new jobs, except for a few architects,” he said. “Subsidies for windmills and solar panels created lots of jobs in China,” but few at home.

    In one of several embarrassing disclosures for the administration, a report last fall by American University’s Investigative Reporting Workshop found that 11 U.S. wind farms used their grants to purchase 695 out of 982 wind turbines from overseas suppliers….

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